104.1 Lesson - LimitedSupply

Screen: LimitedSupply

Headline: Special Characteristic

Reward: 2

Text: Governments can print fiat money in unlimited quantities.

By way of contrast, the supply of Bitcoin is fixed — and can never exceed 21 million coins.

A continually increasing supply of fiat money creates inflation. This means that the money you hold today is less valuable in the future.

One simple example: A loaf of bread that cost about 8 cents in 1920. In the year 1990 one loaf cost about $1.00, and today the price is closer to $2.50 !

The limited supply of bitcoin has the opposite effect, one of deflation.

This means that the bitcoin you hold today is designed to be more valuable in the future — because it is scarce.

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QUIZ

Question: Is the supply of bitcoin limited forever?

Answer: Yes. There can never be more than 21 million bitcoin created.

Feedback: Correct. By limiting the amount that can be created, Bitcoin is designed to increase in value over time.

Correct: true

Answer: No. The government can create more bitcoin at any time.

Feedback: Wrong answer. The government has no control over Bitcoin.

Correct: false

Answer: No, the bitcoin software can be changed to allow more bitcoins to be created.

Feedback: Incorrect. One of the key attributes of bitcoin is that the supply is limited forever.

Correct: false